Europe has ‘long, agonizing’ and ‘slow’ recovery ahead

The eurozone is still in denial about the threat posed by low inflation and risks drifting into global irrelevance unless it makes structural reforms, a top economic advisor said on Tuesday at Fortune’s Most Powerful Women international conference in London.

Baroness Shriti Vadera, a former key advisor to then-British prime minister Gordon Brown, said Europe still has a a long road ahead of it before fully recovering from the last financial crisis. Unlike the United States, which cleaned up its banking crisis “very swiftly,” European’s banking system is barely finished with its final stress tests. Vadera also pointed to low inflation as a significant threat to the euro zone and said the European Central Bank has yet to effectively address the issue.

“Most of Europe has enormous work to do with structural reforms,” Vadera told Fortune’s Deputy Managing Editor Stephanie Mehta in an exclusive interview. “But, it is very hard to do it in parallel with austerity. Frankly it hasn’t been done… This is going to be a long, agonizing and slow grind in Europe. There is just no way out of it.”

The analysis comes from the woman who helped guide Britain’s response to the 2008 financial collapse. With 30 years of international experience in the public and private sector, Vadera advises government, investors and companies on finance, strategy and everything in between. A non-executive director of BHP Billiton BBL and AstraZeneca AZN, Vadera is also a former member of the U.K. Treasury’s Council of Economic Advisers.

Vadera went on to say that Europe, as the biggest economic bloc in the world, “boxes below its weight” on the global economic stage. From experiencing an “acute crisis” of poor performance in Europe, Vadera said the problem has mutated into a “chronic phase”. She warned that Europe could become irrelevant if its economic issues persist.

“If you talk to, say, any Chinese leader they will tell you that they don’t consider it as Europe. There’s Germany, and Britain and France… so it doesn’t come together as a unified power bloc as it should.”

Vadera had a slightly more optimistic outlook for India, which she said is in a position to seize unprecedented economic growth after Narendra Modi was elected as prime minister in May. She said India could become one of the fastest growing big economies in the world if Modi is able to create growth by cutting corruption and improving the country’s still-inadequate infrastructure.

“It is going to take a bit of time and he [Modi] doesn’t have unfettered power… so it is going to be a balance, but I have hope,” said said. “It is almost India’s best chance, but probably its last chance.”

Vadera has a track record of making accurate global economic predictions at Fortune live events. Last year at Fortune’sMost Powerful Women Summit, Vadera said the U.S. was well on its way to economic recovery and called the then-looming consequences of a debt default “unthinkable.”